Greenspan said that economic developments over the past few years have been a challenge for monetary policy.
Greensapn defended the Fed's increase in short-term rates from 4.75 pct to 6.5 pct from June 1999 through May 2000, saying that this "barely slowed the expansion of liquidity, judging from the growth in M2 money supply, which declined only modestly through the tightening period."
At the same time, even thougth it was apparent by the middle of last growth was slowing, "had we moved the funds rate lower at the first sign of economic slowing, we would have created distortions threatening an even greater economic adjustment at a later date," Greenspan said.